Fonterra to hoard milk powder

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Fonterra plans to stockpile about 120,000 tonnes of excess milk powder in warehouses across the country.

Colliers International has brokered leases for 43,000 square metres of storage in Auckland, Hamilton, Palmerston North and Christchurch to Fonterra. The dairy giant is said to have leased another 27,000sqm of industrial storage space over the past two months.

Guy Roper, Fonterra's commercial director of global trade, confirmed Fonterra was stockpiling but would not confirm the amount for commercial reasons.

"It seems a lot but it's not a lot in terms of what we do every day," Mr Roper said. "We are comfortable with where we are at the moment. Inventory levels are above where we would like them to be."

He would not say how much the stockpiling cost Fonterra, but said the cost had been factored into last month's revised milk payout of $5.10 per kilogram of milksolids.

Waikato farmers supplying the co-operative were not concerned with the stockpiling and thought Fonterra would have a good reason for it.

"It's only 12 per cent," said Michael Cooper, who farms 120 cows producing 50,000kg of milksolids on 39 hectares near Waitoa. "It brings back memories of old it's nothing that has not happened before."

He suspected Fonterra's customers were depleting their milk powder stocks before buying any more in the hope that the price may drop further and did not expect the milk powder price to go back up until there was a shortage.

The stockpile was news to Andrew Thurlow, who farms 400 cows producing 140,000kg of milk solids on 120ha at Te Kauwhata.

"If you can stockpile it and control the market it's probably a good idea but if it's not going to make any difference it's probably a waste of time ... somebody must have done the sums," he said. "I am trusting that Fonterra's management has made the right decisions."

Angela Peterson, who share milks 460 cows producing 170,000kg of milksolids on 142ha near Te Aroha with her husband, Mark, said: "If you look at it in the big scheme of things the whole world is screwed."

She said she was not concerned with the stock-piling "so long as we have got an income to feed our family". "There are some people who are worse off than we are without a job at all."

Mr Peterson could see no problems as long as Fonterra could afford the storage. "There's no point in selling it for less money than what you can make it for ... that does not benefit farmers."